in its practical acceptation, means the arrangement by which the property of an insolvent trader or speculator is realized and distributed among his creditors according to an equitable adjustment of their claims. The term bankrupt has been derived through the Norman phraseology of English law, from the old French banqueroute, a word of disputed etymological origin. The term, in its earlier acceptation, involved an accusation; and the bankrupt of the old law was, according to Blackstone, "a trader who secretes himself, or does certain other acts tending to defraud his creditors." The incalculatory attribute is still retained in the law of France, where the banqueroutier, by coming within the penal law, is distinguished from the failli, or the tradesman who has become insolvent without fraud or other penal culpability.

It has been a characteristic of the laws of rude times to endeavour to trammel the extent to which legal engagements may be incurred—as, for instance, by usury laws prohibiting loans at the current or market interest of the day; while, on the other hand, they have been found to place tyrannical and exterminating remedies in the hands of creditors for enforcing such obligations as the law ordained. It seemed to be considered that there was no choice but to let the creditor exercise his will—were it to the extent of slavery or a cruel death—against the debtor unable to fulfill that obligation which the law acknowledged, and the remedies against the insolvent debtor in the twelve tables became proverbial for their sanguinary ferocity. The manner in which the conflicts between debtor and creditor in republican Rome shook the state is well known to all readers of history. It was not until the ascendancy of Julius Caesar that a distinction is said to have been drawn between fraud and calamity, so that the debtor was released from liability to indiscriminate cruelties if he gave up all his property to those who had claims against him. It is usual, at all events, to attribute to the Lex Julia the origin of the cessio bonorum, or yielding up of goods—an expression still in practical use, and employed in Scotland and other countries which have inherited the civil law.

With the rise of trade in the sixteenth century a material distinction came to be established between commercial and ordinary debtors. Perhaps the distinction, which we shall presently see to have its own peculiar justification, arose in England; and arose there not from any philosophical distinction being taken between the position of the commercial speculator and that of the ordinary debtor, but from that dislike of the civil law which made Westminster Hall reject the Roman cesso, and continue to discard it both in name and principle until the year 1826, when the first insolvent debtors' act was passed.

Nearly three centuries earlier, however, the principle of a general distribution of the debtor's goods had been at least approached as a remedy for the difficulties of mercantile men. The long line of English bankrupt statutes traces its parliamentary genealogy back to the year 1542, when an act was passed nominally intended not so much to establish a general system of realization and distribution of the property of insolvent traders, as to check certain characteristic frauds which traders were deemed to enjoy peculiar facilities for perpetrating. Thus the act (34th and 35th Hen. VIII. cap. 4) founds its remedial provisions on the preamble, "Whereas divers and sundry persons, craftily obtaining into their hands great substance of other men's goods, do suddenly flee to parts unknown, or keep their houses, not minding to pay or restore to any of their creditors their debts and duties, but at their own wills and pleasures consume the substance obtained by credit of other men, for their own pleasure and delicate living, against all reason, equity, and good conscience." Though thus directed, however, as a remedy for fraud, the statute set the precedent of a general distribution, which was more distinctly organized and assigned as an exceptional remedy against the trading classes by the act of 1570.

This being a mere remedy against frauds supposed to be peculiar to the trading class, the law of bankruptcy gradually resolved itself into a system for the speedy distribution of the effects of the insolvent trader among his creditors. While it thus changed its character from a species of penal correction and preservative against fraud, to an adjustment equally merciful to the harassed insolvent and equitable to the perplexed and discontented creditors, it retained its original peculiarity as a system applicable solely to tradesmen, and, like many other legal peculiarities which have had a fortuitous origin, this specialty has been preserved for efficient reasons.

It might appear at first that, if it be right, in the case of a tradesman in difficulties, to distribute his available effects, and enable him with his obligations discharged to start on a new race for success, it is just that all other classes of debtors should have the same privilege. It has not been usual, however, to make the privilege universal; and the following reasons may be set forth against its being so.

The true purpose of a bankrupt law is not only to release the insolvent debtor from persecuting creditors, to realize his available funds at once, and to distribute them according to an equitable adjustment among all claimants; but also to discharge the bankrupt from all subsequent legal responsibility for debts contracted before his bankruptcy. When a man is engaged in trading speculations, the justice of giving him a discharge when he yields his whole available means to his creditors, is founded on their having in some respects connived with him in his speculations, and thrown themselves on the chances of his general success. Wherever the element of credit has been admitted into trade—and there is seldom extensive trade without it—the liability of each associate in the circle of transactions must more or less depend on that of the others. The importer grants his bill to the producer, trusting to be able to meet it from the price of the imported commodities, and the producer who takes his bill becomes a sharer in the chances. The importer, in his turn, takes the warehouseman's bill on a similar expectation; and he in his turn receives as payment the bill of the retailer, who, knowing that he has a market for the goods, believes that he will be able to retire the bill. If, from any accidental break in the circle of credit—from the loss of a vessel, a fire, or even the failure of a trusted debtor—some one in the circle should be unable to pay his obligations, it would be cruel to leave him all his days at the mercy of every greedy or malignant man who may have had a claim against him. Thus the law of bankruptcy, after a debtor has fairly surrendered his available estate for distribution among his creditors, permits him to be discharged as if he had paid them all in full.

But, in the general case, the private debtor who purchases for consumption or possession, not to sell again, holds himself out as possessed of means to meet the obligation so incurred. At all events, he does not depend on the success of his trading with the commodity purchased by him. Hence his creditor is not a participator in a speculation, and neither directly nor indirectly looks to the debtor's chances of success for payment. In the general case, when such a debtor finds himself unable to pay his debts, his difficulties arise from wilful extravagance, or careless miscalculation; and excepting, perhaps, the too great credulity of creditors, he has no one's conduct to blame but his own. The humanity of the later English law provides for the immediate relief from execution against person or property of all persons who become embarrassed without fraud or excessive recklessness. But there is this general distinction,—and it has been the object of the preceding remarks to make it the more emphatically distinct,—that such debtors do not obtain their discharge from all obligations, which is the closing scene of a mercantile bankruptcy. If debtors not connected with trade could thus effect, when plunged into the lowest depths of insolvency, a complete release from all their obligations, we would have the spendthrift passing through the ordeal before the opening of his succession to an estate, and laughing at the creditors, of whom he is as much as ever he was morally, though he may not be legally, the debtor.

The defect of the English system, undoubtedly, was to make the distinction too broad, and, while a code of bankruptcy had been gradually reared up for the distribution of traders' estates, to leave the ordinary class of debtors to the mercy of their creditors until the jails, becoming choked, were from time to time emptied by those legal protests against the inhumanity of the law, the acts for the relief of insolvent debtors. A permanent measure for dealing with insolvents not in trade was at last adopted, and an account of it will be found under the head of insolvency. It is chiefly of importance here from its preserving the principle, that the debtor not in trade, however he may be protected from execution, is not to be relieved from his obligations, should he afterwards obtain property which might be applied to them. The commissioners appointed to inquire into the state of the law of bankruptcy and insolvency, who reported in 1840, said—

"The immediate object of the bankrupt law is the equal distribution of the effects of traders who cannot meet their engagements—it's ordinary consequence, the release of such traders from all future liability of their persons and after acquired property.

"The object of the law for the relief of insolvent debtors is the personal discharge of honest debtors, prolonged imprisonment by way of punishment for the dishonest and fraudulent, and a fair distribution of their present effects, and future acquired property, among their creditors."

The availability of the future acquired property is thus the peculiar responsibility from which the trader is exempt. Perhaps the line is sometimes arbitrarily drawn, excluding some who ought to be included in the class, entitled at once to clear themselves of responsibility for past debts. That the definitions of the bankrupt acts have never cut clean, has been shown by the crowds of persons who have been admitted within the definitions of trading persons contained in them, without having been intentionally or definitely included. Still the existence of a distinction between dischargeable and undischARGEABLE insolvents is fundamental to the bankruptcy system of the great trading nations, although there is probably a tendency to modify the difference between them. Thus in England, the measure of 1844, called "An Act for facilitating arrangements between Debtors and Creditors" (7th and 8th Vict. cap. 70), provides for the discharge of insolvents, though not in trade, if they have a certain amount of concurrence from their creditors. The insolvent must have the concurrence of a third of his creditors (calculated both by number and value) to the initial steps; and to conduct his discharge he must not only have certain proportional consents at a preliminary meeting, but at the conclusive meeting must have the votes of three-fifths in number and value, or of nine-tenths in value, or of nine-tenths of those whose debts exceed L20. In the general bankruptcy act passed by congress in 1841 for the United States, there was a large extension of the old privileges of bankruptcy to classes of persons not in trade; and it has been stated that this was the main reason for the repeal of the act in 1843, which left the United States without any general system of bankruptcy law.

The classes of persons subject to the bankrupt law in England have been enlarged from time to time by successive statutes. The conditions of circumstances called "acts of bankruptcy," which bring a trader within the operation of the law, have also been more fully defined from time to time. Some standard definitions have, however, been always religiously preserved from the old acts, because they possess not only their natural meaning as English sentences, but carry with them the whole substantive law of a long series of decisions, fixing their application to practical life and business. Hence, these definitions are ever terse and distinct, enabling one section of the bankrupt act to contain more law than all the others. Thus, each event is briefly described in a series of sentences like these: "If any such trader shall depart this realm, or being out of this realm, shall remain abroad or depart from his dwelling-house, or otherwise absent himself, or suffer himself to be arrested for any debt not due," &c., has an extensive practical meaning in law; and it is only to be regretted, that while great power and precision are imparted to these brief definitions by the proceedings of the courts of law for more than 200 years, the definitions, so pregnant with meaning to practical lawyers, convey little or no information to the rest of the world.

A rapid series of reforms in the English bankruptcy law began at the conclusion of the first quarter of the present century, and it may be questioned if they are yet concluded. The act of 1825 (6th Geo. IV., cap. 16) gathered up all the stray improvements which had been for some time scattered through the statute-book, and consolidated them with some new and significant alterations. It contained the fruit of Sir Samuel Romilly's enlightened speculations, and in furtherance of his suggestions, made provision for proving or adjusting the claims of annuitants and persons who were not immediate, but merely contingent creditors; both of them classes whose admission to a claim on the estate required the operation of the law of chances. A novelty in the law of England was introduced by this act, from the practice long known in Scotland as the "composition contract," by which the sanction of the bankrupt law is given to an engagement on the part of the bankrupt to pay, and on the part of his creditors, to accept in full, a certain sum as a single and final dividend.

A great revolution both in the judicial and administrative department of the bankrupt law was begun by Lord Brougham's Act of 1831 (1st and 2d Will. IV., cap. 56). One of its main features was the establishment of a separate tribunal in bankruptcy, and the substitution of a "flat" instead of the old "commission" issuing from the Court of Chancery. Another great feature in this measure was the appointment of "official assignees" in connection with the court of bankruptcy, who as neutral stipendiary officers have charge of the property immediately on the bankruptcy, and see to its fair distribution among the creditors; while the "chosen assignee" in each estate, as the general representative of the creditors, finds it his function to make the estate collectively large, without reference to its division. The bankruptcy laws of England were consolidated in 1849, in an act consisting of 278 sections (12th and 13th Vict. cap. 106). Again there was a change in the essential nomenclature. The "flat" was superseded, an "adjudication" substituted for it, and the relations of matters in order of time, of which the flat was the criterion, came to be considered in relation to the petition for adjudication. Another and highly important arrangement completes a series of changes by which judicial inquiry and decision on the conduct of the bankrupt have gradually superseded the arbitrary votes of the creditors for treating him according as they might deem fitting, from the influence of his conduct on their feelings or opinions. A public sitting is held on the allowance of the certificate, and the commissioner there hears creditors, giving weight to their statements and pleadings, but not acting under their votes. Should no creditors give opposition, there is still to be inquiry, "and the court having regard to the conformity of the bankrupt to the law of bankruptcy, and to his conduct as a trader before as well as after his bankruptcy, and whether the allowance of such certificate be opposed by any creditor or not, shall judge of any objection against allowing such certificate, and either find the bankrupt entitled thereto and allow the same, or refuse or suspend the allowance thereof, or annex such conditions thereto as the justice of the case may require." The form of the certificate is calculated for still more emphatically bringing out this judicial determination of the bankrupt's moral rank, by dividing certificates into three classes, first, second, and third. The alternatives are, "and I farther certify that his bankruptcy has arisen from unavoidable losses and misfortunes, and that he is entitled to, and I do award him, this certificate as of the first class; or that his bankruptcy has not wholly arisen from unavoidable losses and misfortunes, and that he is entitled to, and I do award him, this certificate as of the second class; or that his bankruptcy has not arisen from unavoidable losses or misfortunes, and that he is only entitled to, and I do only award him, this certificate as of the third class."

This arrangement, adding to the judicial function of deciding on particular disputed points, that of fixing the character and position in life of the citizen, has not been long enough in force to let its effect be fully appreciated. From a return to the House of Lords in May 1853 of the number of certificates granted to bankrupts since the Consolidation Act of 1849, it appears that of a total number of 1513 certificates which had then been granted, 416 were first, 719 second, and 378 third class certificates. There is said, however, to be much difference of opinion among the commissioners as to the principle on which bankrupts should be classified; the first-class certificate being in many of the country districts given as a matter of course in all ordinary cases, while in London, certificates of the third-class have been awarded in ordinary cases, without any intention of conveying reflection or censure.

The establishment of the court of bankruptcy consists of two lords justices, with five London commissioners, and separate district commissioners in Manchester, Liverpool, Birmingham, Leeds, Bristol, Exeter, and Newcastle. There are ten official assignees in London, and two or more in each district, and the court has an accountant with a staff of registrars, clerks, and other subordinate officers.

The main objects to which the vast amount of late legislation on bankruptcy has been directed, are the instantaneous adjudication and publication of the debtor's condition as a bankrupt at the moment when this becomes properly necessary, the equally instantaneous or immediate transference of all his property into impartial and responsible hands, the effective management of the property, its conversion into cash with the greatest practicable rapidity, the detection, exposure, and, in flagrant cases, the punishment of any attempts by the bankrupt to conceal or withdraw property, or unduly to favour particular claimants, a rapid and impartial distribution of the funds, and finally, the restoration of the bankrupt to society, with a character in the commercial world adjusted to that of his conduct towards his creditors. It is still a matter of complaint, that if these objects be effected it is in a very costly manner, and that the multitudinous fees incurred sweep away the greater part of the estate in petty bankruptcies. The adoption of official assignees appears to have been the only measure which has met with unqualified approbation in the commercial classes, and in a "Paper of Observations" laid before the House of Lords in 1853, in relation to a bill for extending the system to Scotland, the value of a control over elected assignees or trustees is shown in the statement, that "these new public officers commenced their useful career under the able superintendence of the commissioners, by recovering, as they were empowered by the act, very large sums of money, amounting to four millions sterling, from the former assignees under old bankruptcies. For two millions and a half of that sum the official assignees found rightful owners; one million and a half nearly for which no owners can be found remain in the bank of England invested in three per cent. consols, and yielding about L45,000 a-year."

The Irish bankruptcy system has been modelled on that of England, the changes of which it has followed from time to time. It was in the year 1771 that the system was first extended to that country, and the Irish statute importing it (11th and 12th Geo. III., cap. 8) is an exact repetition of the sections of various English statutes. It has been followed by several successive acts, and all were consolidated in 1849 by a measure immediately following the English act in the statute-book (12th and 13th Vict. cap. 107). There were formerly thirty commissioners to Ireland, but in 1836 one salaried commissioner was appointed, and another was added soon afterwards. The old phraseology is returned to, the lord chancellor issuing a commission, and there are two official assignees. The provisions for carrying out arrangements with their creditors by debtors who are not traders according to the English act of 1844, are incorporated in the body of the measure, and this seems to have created a doubt whether, since they are a portion of an act strictly applicable to traders, they can be construed to include the class of debtors for whom they were after the example of the English act designed (see Clements On the Law of Bankruptcy in Ireland, p. 162). In the Irish act the distinction of certificates into three classes according to the later English arrangements has not been followed.

In Scotland the bankruptcy system, with the same general object as that of England, has a totally different machinery and nomenclature. That arrangement for the collection and distribution of a trader's insolvent estate, which in England receives the name of bankruptcy, is there called "sequestration," and the term "bankrupt"—which, to have a proper legal signification, has the prefix "notour," or notorious—is comprehensively applied to persons, whether traders or not, whose insolvency has been rendered distinct and public, by legal steps for the enforcement of debts having advanced against them to a certain point—for instance, by a writ having been issued for imprisonment, or a permanent attachment having been laid on property or effects. The earliest arrangement for something like an equitable adjustment of the claims of conflicting creditors was a feature of the judicious policy of the revolution settlement, and dates from the year 1691. A system, however, peculiarly adapted, like that of England, to the estates of traders, was not adopted until the year 1772; and, as it is obviously easier to enlarge than to contract the influence of legal nomenclature, it was necessary to abandon the use of the word "bankruptcy," already possessed of a broader signification, and to confer on the narrower word "sequestration" a new and wider meaning coextensive with the operation of the act. The sequestration system was revised in 1814 (54th Geo. III. cap. 137), and again in 1839 (2d and 3d Vict. cap. 42). The act of 1839 is the leading sequestration act, though some of its operative clauses were altered by a third act in the year 1853 (16th and 17th Vict. cap. 53). The chief object of the amending act was to abbreviate the procedure, so that when the arrangements are satisfactorily conducted, the payment of the first dividend and the bankrupt's discharge may take place in six months from the date of the sequestration. So far as it applies to living debtors, the sequestration, like the English bankruptcy, attaches only the estates of traders or speculators; but, by the act of 1839, the estates of a deceased person may be sequestrated without reference to his occupation, and the process has been frequently adopted as a method of distributing estates liable to complicated claims.

The sequestration issues from the Court of Session, whence it is remitted to the sheriff of the county, who to some extent fulfils the functions of the English commissioner. The system of official assignees is unknown in Scotland. The estate passes first into the hands of the "interim factor," and next into those of the "trustee," who acts in the double capacity of administrator of the property, and judge in the first instance of the claims of the individual creditors. The interim factor, who was formerly elected, is by the act of 1853 judicially nominated. The trustee is still chosen by the creditors. His election often occasions a keen contest, and the reports of decisions in the Court of Session show many instances in which such competitions are fruitful in litigation. The battle-ground of such a question is generally on the qualification of a creditor to give the vote which he has offered. It may be objected by the supporters of the opposing candidate, that the debt set forth is not a sufficient qualification for the vote, or that if it may be in itself a foundation for a vote, the statutory requisites have not been complied with in the method of stating it. It appears to have been the fundamental design of the system, that if a creditor complied with certain simple formalities and swore to his debt, he was to be admitted as a creditor for the preliminary operation of a vote, however baseless his debts might afterwards turn out to be in the fuller inquiry necessary to entitle him to a dividend. Creditors were thus to be taken at their word for the privilege of voting, provided they complied with the proper formalities. But whatever may have been the design of the founders of the system, the keenness of the aspirants for the office of trustee, and the practice of the courts of law, have together made the competitions little clusters of litigation about the debts of all the creditors who may have voted. In the act of 1853 the litigation is at all events limited to the inferior courts, and there are provisions intended to render the forms of claims less complex. A feeling has however arisen, especially among creditors out of Scotland, that the eagerness of these contests points to objects inconsistent with the impartial administration of the estate, and especially to the interests of distant creditors who cannot easily take a part in them; and it is maintained that such powers as those possessed by the trustee ought not to be committed to an officer who owes his election to the superior influence or tactics of a party among the creditors.

On this and other grounds, there have lately been very urgent demands on the part of English merchants for a fundamental alteration of the Scottish sequestration law, and its closer adaptation to the English system; and a bill to accomplish this object was, at their instance, introduced by Lord Brougham in 1853. Undoubtedly there is no branch of the law where, on account of the universality of its influence, international uniformity is more important, nor is there anywhere it is more easily obtained, since the whole system is statutory and administrative, and has been subject to many changes in either end of the island. In England the nomenclature has been so frequently altered, that what was formerly a "commission" was lately a "fiat," and is now a "petition and adjudication," while the same thing in Scotland is called the "interlocutor awarding sequestration." There is much essential confusion in the totally different meaning of the word bankrupt in the two countries, and besides other nominal differences, such as that of "assignee," and "trustee;" what is termed "proving" a debt in England is called "ranking" it in Scotland, and the "certificate" of a bankrupt is called the "discharge" in a sequestration.

Almost every civilized country in the world possesses its code of bankruptcy, directed with more or less fulness to the objects which have been described as the aim of our own systems. In France a new bankruptcy law was inserted into the code of commerce in the year 1838. One fundamental peculiarity of the system there has been already referred to. The possession of a tribunal of commerce at the head of this, as of other departments of the mercantile law, is another peculiarity of the organization in that country. The faillite is declared by the court on the declaration which an insolvent stopping payment is bound to make to the registrar, on application by creditors as in this country, or proprio motu of the court itself. The court appoints one of its own members judge-commissioner, to perform functions corresponding with those of the official assignee in England. Another officer called the syndic, who is compared to the English trade assignee, is also appointed by the court, whence all the operations in the French system issue. The creditors collectively have no selection of officers, but they have, as in Britain, certain powers of general action for their common interests, as by adopting a concordat with the debtor, authorizing the business to be carried on, and the like. The portions of the code relating to this head have been made accessible to the English reader in a little work called The Law of France in relation to Insolvency and Bankruptcy, &c., by Richard Miller, 1853.

It has been mentioned above that a general bankruptcy system adopted by congress for the United States in 1841 was repealed in 1843, and each state in the union has now its own system.